Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

What would you like to follow?

Riding on the shale revolution yet again, the United States topped the global energy production charts in 2017 by churning out more than 15 million barrels per day (MMBbl/d). Retaining its status as the world's No. 1 producer of petroleum and natural gas hydrocarbons for the sixth straight year, the United States has beaten Saudi Arabia and Russia.

As crude prices surged last year to above break-even levels, American drillers extracted record amounts of oil, especially from the less expensive shale plays even as Russia and Saudi Arabia withheld supplies to revive the commodity.

It must be mentioned that the United States became the world’s largest natural gas operator back in 2009 when it went past Russia, while it jumped to the top of the petroleum hydrocarbons leaderboard in 2013 ahead of Saudi Arabia. As far as overall production is concerned, the United States has been the world's top producer since 2012.

The Shale Revolution

With the advent of hydraulic fracturing (or fracking) – a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals – shale production is now booming in the United States. Coupled with sophisticated horizontal drilling equipment that can drill and extract oil/gas from shale formations, the new technology is being hailed as a breakthrough in U.S. energy supplies, playing a key role in boosting domestic reserves. As a result, once faced with a looming deficit, oil and natural gas are now available in abundance.

U.S. Production Rises in 2017 to Maintain No. 1 Position

According to the Energy Information Administration (EIA), which provides official energy statistics from the U.S., domestic liquids supply increased by 745,000 barrels a day last year as oil prices gained 21% to around $65-a-barrel.

In contrast, both Saudi Arabia and Russia saw their petroleum output decrease in 2017 as part of a broader alliance – forged in late 2016 – to limit production. The agreement, now renewed twice, keeps 1.8 million barrels a day (or 2% of global supply) off the market in an attempt to clear a supply glut.

Meanwhile, U.S. natural gas production turned around from previous year’s loss but rose by a meagre 1% in 2017. The tepid growth was mainly on account of lower prices prevailing in the early part of the year, relatively warmer winter weather (compared with 2016) and fall in power generation demand.

On the other hand, Russia and Saudi churned out significantly higher natural gas in 2017 – growing at 8% and 6% year over year, respectively.

Overall, U.S. production of petroleum liquids and natural gas reached an estimated 15.60 MMBbl/d in 2017.

What’s Ahead?

The EIA further added that U.S. petroleum production is forecast to average 17.58 MMBbl/d in 2018 and 19.14 MMBbl/d next year, continuing the positive trend from 2017.

Volume from U.S. oil fields (inclusive of shale) has risen 27% since mid-2016 to more than 10.7 million barrels per day – the most since the EIA started maintaining weekly data in 1983. In early February, oil production broke through the 10 million barrels a day threshold for the first time in nearly 50 years and has maintained the record levels thereafter. In fact, domestic volumes are now breathing down the neck of top producer Russia, which pumps around 11 million barrels per day.

The EIA also predicts natural gas production to set a new record in 2018, churning out 80.5 billion cubic feet on a daily basis.

Shale Industry Adjusts to the New Reality

Now at a financial equilibrium, the shale firms are putting more rigs and employees back to work. Throughout the downturn, producers (in North Dakota and particularly the Permian Basin in Texas) worked tirelessly to cut costs down to a bare minimum and look for innovative ways to churn out more oil from rock. And they managed to do just that by improving drilling techniques.

With these efforts, many upstream companies have repositioned themselves to adapt to the new $50-$60 oil reality and even thrive at those prices. In other words, while OPEC's moves to trim output and rebalance the demand-supply situation has stabilized the market to a large extent, in the process it has incentivized shale drillers to churn out more.

Wildhorse is a company focused on the acquisition, development, exploration and operation of unconventional, onshore oil and gas properties in the northeastern end of the Eagle Ford Play in South Texas. In the last 60 days, six earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 25% in the same period.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

Zacks Mobile App

Zacks Research is Reported On:

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.26% per year. These returns cover a period from January 1, 1988 through December 3, 2018. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

Visit performance for information about the performance numbers displayed above.

We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms and Conditions of Service.